Fire and rehire to become automatically unfair dismissal in most cases

Dismissing an employee and rehiring them on worse terms and conditions — the legal term is dismissal and re-engagement — will in most cases become an automatically unfair dismissal from January 2027Acas under the Employment Rights Act 2025Acas.

Fire and rehire means ending the existing contract and offering re-employment on worse terms. The government has not given an exact date in January 2027 for the change, and detailed official advice is expected in December 2026Acas. A reason is automatically unfair where it is the main reason for the dismissal, and an employee does not need two years service to claim automatically unfair dismissal.

Until the change takes effect, a dismissal to impose new terms still has to satisfy the ordinary unfair-dismissal test. The employer must have a fair reason, follow a fair procedure, give the right notice and offer a right of appeal, and that applies even where the employee accepts the new contract and stays in work. Where the reason is not redundancy, employers rely on some other substantial reason, which an employment tribunal accepts only in limited circumstances, such as severe financial pressure after exhaustive attempts to agree the change where no alternative to dismissal exists.

Tribunals weigh whether the employer had a good business reason, consulted reasonably and genuinely including compromises where appropriate, balanced the organisational benefits against the disadvantages for affected staff, considered alternatives, took account of any recognised trade union view, and how many employees accepted or rejected the change and whether refusal was reasonable. Dismissal and re-engagement must remain a last resort after all reasonable attempts to reach agreement through full and thorough consultation.

The Code of Practice on dismissal and re-engagement is the minimum fair procedure, including contacting the Acas helpline before raising dismissal and re-engagement with staff or representatives. Where 20 or more dismissals are proposed at one establishment within 90 days, the employer must collectively consult a recognised trade union or elected representatives on avoiding dismissals, reducing numbers and limiting consequences, starting at least 30 days before the first dismissal for 20 to 99 employees and at least 45 days before for 100 or more, following the redundancy collective-consultation process. Failure risks a protective-award claim, and unreasonable failure to follow the Code can increase an award by up to 25 percent or reduce it by up to 25 percent. The Code does not apply to redundancy dismissals, where a fair redundancy process and redundancy pay apply instead.

Employees who are offered re-engagement do not have to accept, and new terms should not start before the old contract ends on proper notice. Continuous employment is usually preserved, including across a short break where the new contract was accepted before the break. An employee who believes the dismissal is unfair should appeal and can claim unfair dismissal from the old contract while continuing under the new one, but should take advice first because it is complex. Tribunal claims are subject to a deadline of 3 months minus 1 day from the end of employment.

Employers planning contract changes for 2027 should pause any dismissal-and-re-engagement timetable, test whether agreement, phased introduction or buying out terms can close the gap, and diary the January 2027 changeAcas and the December 2026 advice. The legal basis is the Employment Rights Act 2025 and the Code of Practice on dismissal and re-engagement.